(TCO 5) The following information relates to Vice Versa Ventures for calendar ye
ID: 2388780 • Letter: #
Question
(TCO 5) The following information relates to Vice Versa Ventures for calendar year 20XX, the company’s first year of operations:Units produced 20,000
Units sold 17,000
Selling price per unit $35
Direct material per unit $5
Direct labor per unit $5
Variable manufacturing overhead per unit $2
Variable selling cost per unit $3
Annual fixed manufacturing overhead $160,000
Annual fixed selling and administrative expense $80,000
(a) Prepare an income statement using full costing.
(b) Prepare an income statement using variable costing. (Points : 8)
Explanation / Answer
Value of goods manufactured for part a : ( 5 + 5 + 2 + 160000 / 20000 ) = 20 * 20000 =400000
a :
Sales ( 17000 * 35 ) 595000
less : cost of goods sold:
Beginning inventory 0
Cost of goods manufactured 400000
Goods available for sale 400000
less: Ending inventory (60000)
( 3000 * 20 )
Cost of goods 340000
Gross profit 255000
Less : operating expenses
Variable selling expense 51000
( 3 * 17000)
fixed selling and 80000
administrative expense
Total expenses 131000
Net profit 124000
B : Variable cost : ( 5 + 5 + 3 + 2 ) = 15
Sales ( 35 * 17000 ) 595000
Less : Cost of goods sold:
Beginning inventory 0
Variable cost of goods
manufactured ( 15 * 20000) 300000
Goods available for sale 300000
less: ending inventory 45000
( 15 * 3000 )
Cost of goods sold 255000
Gross profit 340000
Less: fixed cost expense
fixed manufacturing overhead 160,000
fixed selling and 80,000
administrative expense
total fixed cost expense 240000
Net profit 100000
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